Sunday, November 16, 2008

It is considered impolite at best to ask life sciences companies about their cost structure and pricing strategies. Life sciences executives can often appear naive, incognizant and uncaring about the basic economics of their industry. They appear to exclusively and superficially target profit maximization and wholly propriety IP development and protection; ironic given the greater goals of healthcare. Life sciences as an industry seems to be at least twenty years behind the high tech industries such as computing and communications in terms of understanding and delivering economic value to a wide audience of end consumers, and in terms of openness and collaboration.

Fixed and variable costs, pricing strategies and quantitative aspects of customer demand are much more known and openly shared and discussed by companies in the high tech industries. That critical piece of entrepreneurialism, understanding the specific economic value of a product or service to the end consumer is absent in life sciences. The problem of course is the “third party pays” dynamic in life sciences where a third party, insurers, pays for services consumed by patients. If patients knew, or perhaps were even paying, prices, their behavior would likely be much more rational, and so too would health services offering have to be much more rational. Price is not discussed and is rarely even available at the doctor’s office.

It is considered impolite at best to ask life sciences companies about their cost structure and pricing strategies. Life sciences executives can often appear naive, incognizant and uncaring about the basic economics of their industry. They appear to exclusively and superficially target profit maximization and wholly propriety IP development and protection; ironic given the greater goals of healthcare. Life sciences as an industry seems to be at least twenty years behind the high tech industries such as computing and communications in terms of understanding and delivering economic value to a wide audience of end consumers, and in terms of openness and collaboration.

Fixed and variable costs, pricing strategies and quantitative aspects of customer demand are much more known and openly shared and discussed by companies in the high tech industries. That critical piece of entrepreneurialism, understanding the specific economic value of a product or service to the end consumer is absent in life sciences. The problem of course is the “third party pays” dynamic in life sciences where a third party, insurers, pays for services consumed by patients. If patients knew, or perhaps were even paying, prices, their behavior would likely be much more rational, and so too would health services offering have to be much more rational. Price is not discussed and is rarely even available at the doctor’s office.